Data-driven decision-making can be the key to a successful business.

In our highly connected world, there are very few aspects of daily life that aren’t driven by data and analytics. From the car you drive to the phone in your pocket to the internet browser you’re reading this on, data is constantly swirling around every nearly facet of daily life. The same can be said for your business. Every customer interaction, every operating cost, every employee’s productivity levels — if you can quantify it, you can collect and act on that data.

Think of your business as a high-end sports car. Each decision you make is the fuel it uses to move forward: common, less thought out decisions are unleaded fuel while data-driven decisions based on information you’ve collected is premium fuel. Sure, you may be able to go down the road with the unleaded fuel, but to reach peak performance and get the most out of your engine, you need that high-octane power that well-researched and data-driven decisions provide.

By identifying the outcomes you want and finding the right data points, you can begin making decisions that are made with the best outcomes in mind from the start. That’s why creating an environment where data-driven decision-making becomes the norm can be a boon to any business, regardless of where they are in their journey.

What is Data-Driven Decision-Making?

While it may sound like something a tech CEO would throw around during their TED Talk, data-driven decision-making isn’t all that hard of a concept to understand and implement. At its very basic level, data-driven decision-making is when you use information you’ve collected to make strategic decisions with an overarching goal in mind.

In business, this means letting instincts and gut feelings take a back seat to cold, hard facts. By collecting enough data over time, you can chart out how your business has been doing and how things are trending. Once armed with that information, you can ensure that the decision makers within a company can look back on those insights to consider any problems they’re facing or any upcoming projects and come up with appropriate actions in a much quicker and more accurate manner.

How Should You Implement Data-Driven Decision-Making?

Though information collection is a huge part of data-driven decision-making, it’s only a part of the equation. Data without anyone to utilize it ends up being just facts and figures sitting on a server somewhere, after all.

It’s imperative that data-driven decision-making measures become an integral part of your business. That means making sure that those who rely on data to make more informed decisions have access to it. To that end, some companies rely on business intelligence tools that make handling that information a breeze.

Even then, just collecting the data and making it easier to understand isn’t the full picture. For data-driven decision-making to really make an impact, it has to be woven into how the company chooses its course of action. For instance, if data collection is to be a keystone of your business, it should be a goal to use that data as effectively as possible. That means attaching metrics to the project at hand and making sure that the right people follow up on the findings. As decisions are made and acted upon, that data can then be used to measure a project’s outcomes, leading to better accountability within the company.

You need data to be the backbone of every measurable goal, the answer to nearly every problem, and the impetus for every new project that’s undertaken. Encourage your employees to be critical and to find areas where data can make processes better.

Using Data in the “Build-Measure-Learn” Cycle

Now that you know how to find and use data in a meaningful way, it’s time to begin experimenting with it. One way you can do that is through the “build-measure-learn” feedback loop. Commonly used by startups looking to learn more about their customers, it’s a rapid experimentation cycle that lets companies quickly find information from the following steps:

• Build. To get things started, you first have to identify the problem. With that in mind, you can create a product, service, or some other thing that you can quickly and cheaply make to use in your test. Entrepreneurs often call this a minimum value product, or “MVP.”
• Measure. Once you have the thing you’re going to test, this is when you begin testing it. Determine what data matters the most for your test and pay attention to that. You then put your “MVP” out in the wild and see how your customers react. Collect all of the data you can about things like engagement, sales, feedback, and so on.
• Learn. Now that you have the data, you can more easily analyze it and determine how well it addresses the perceived problem. Make sure the findings are then shared with everyone that needs to know the outcome so further decisions can be made.

Using Data to Understand, Set, and Implement Key Performance Indicators

Another area where data-driven decision making quickly becomes an important tool is the creation and adherence to various KPI, or key-performance indicators. Think of KPIs like goals that everything from the company overall down to each individual employee must work to meet. For example, a sales rep may have a quarterly KPI where they have to increase widget sales by 15%.

In most instances, that KPI was created because someone looked at the sales data and decided that in order to fix the problem, the best solution would be to push for an increase in those sales. This is a direct use of data-driven decision making in itself.

Then, after the quarter is over, that employee’s supervisor looks at the sales data collected over the previous three months and compares it to the KPI. Depending on how that employee’s sales numbers match up with their KPI, the supervisor can then use the data to determine the next course of action, either praising and increasing the quarterly mark or finding ways to increase sales if the figure lagged behind expectations.

By weaving data-driven decision-making into your KPIs, you can ensure that your business is always looking for ways to improve on a regular basis.

Outcomes to Expect When You’re Data-Informed

Once data becomes an integral part of your company’s decision making process, there are a number of benefits that could come out of it. Though these things won’t likely happen overnight, here are some things you and your colleagues may experience once things get rolling.

More confident decision making. Gone are the days where you wonder if the choice you’re making is the best move for the business. By consulting up-to-date data and using that to determine potential outcomes, decisions will be made with less second guessing, since you’re replacing any subjective considerations with objective fact.

Makes the company more proactive. Over time, your company will be able to utilize the data it collects to identify trends and patterns. Rather than wait for a problem to occur, your data may figuratively become a bright red warning sign alerting you to potential problems, allowing for changes to be made to avoid the coming crisis. Similarly, it can help you find shifts in the market so you can outflank your competition.

Creates an air of accountability. As decisions are made, the data you collect will allow you to see the outcome of those choices in almost real time. Trackable data allows you to assess how decisions were made and what could be done better in the future. Data has no agenda and numbers don’t lie, so you can trust that choices are being made to reach the best possible outcome, while gaining the added benefit of reducing internal disagreements.

Increases revenue. The data your company collects can help find ways to increase existing revenue streams, find entirely new ones, or identify new customer bases to tap into. Once found, you can then use data-driven decision-making to determine the best way for you to leverage those new revenue streams.

Better customer service. By collecting customer data like satisfaction and how they’d rate their experience with your company, you can find areas where you can improve. This not only helps ensure your current customer base remains happy, but it can also bring back customers that may have fallen off of your brand. It could even bring in entirely new customers who hear that you’re making improvements based on the data you collect.

Bottom Line

In today’s hyper-connected world, data drives so much of how we interact with the world. By making data part of your company’s decision making process, you ensure that you’re getting the most up-to-date information about nearly every aspect of your business. Though there may be some initial investment needed to adapt a new way of thinking, failing to do so in such a rapidly changing environment could mean the difference between success and failure.